U.S. policymakers must "fundamentally rethink" the government's role in the nation's housing market, and a key part of that will be determining what to do with Fannie Mae (FNM) and Freddie Mac (FRE), Treasury Secretary Timothy Geithner said Thursday.

Geithner, appearing on Capitol Hill to sell the Obama administration's regulatory overhaul plan, said it was "essential" that Congress and the White House figure out what to do with the two mortgage finance giants that have been under government control since last September.

But any decisions on the future of the two firms should be part of a broader consideration of what role the government should have in encouraging homeownership and housing policy, he said. Additionally, he said the Treasury and the administration "couldn't do it carefully enough, thoughtfully enough in this time frame."

-By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273; michael.crittenden@dowjones.com